Closing Down a Limited Company: UK Guide & Tax (2026/27)

Maybe you’re retiring, taking a permanent job, or the business simply hasn’t worked out. Whatever the reason, closing down a company is more than filing one form. Companies House, HMRC, your bank and anyone you owe money to all have a part in it, and the order you do things in affects how much tax you pay on what’s left.

This guide to closing down a limited company walks through each route, the costs and timings, the tax on your final payout and what changes if the company owes HMRC. Every figure is checked against GOV.UK and HMRC guidance for the 2026/27 tax year.

Closing Down a Limited Company: Your 4 Options

According to GOV.UK, you usually need the agreement of the directors and shareholders to close a company, and the right route depends on one question: can the company pay its bills?

Strike-off is by far the cheapest way of closing down a limited company: £13 online plus your accountant’s fee for the final accounts and tax returns. A liquidation adds an insolvency practitioner’s fee, which is normally several thousand pounds, so an MVL only makes sense when the tax saving outweighs that cost.

Solvent or insolvent? The test that decides your route

A company is generally insolvent if it can’t pay its debts as they fall due, or if its liabilities are bigger than its assets. If either is true, the directors’ duties shift towards protecting creditors, and the solvent routes may no longer be open. An MVL also needs the directors to swear a declaration that the company can pay all its debts, with interest, within 12 months, so getting this wrong is serious.

Leaving the company dormant instead

If you might use the company again, you can avoid closing down a limited company altogether and keep it on the register as a dormant company. It must not trade or receive income, but it still has to file annual accounts and a confirmation statement every year, so the cost doesn’t stop entirely.

How to Close a Limited Company by Strike-Off (DS01): Step by Step

If you’re asking “how do I close my limited company?”, the answer for most small, solvent companies is a voluntary strike-off: the directors apply to Companies House, the company is removed from the register, and it stops existing as a legal entity.

Can you apply? The 4 conditions

GOV.UK only allows a strike-off if, in the last 3 months, the company:

• has not traded or sold off any stock;
• has not changed its name;
• is not threatened with liquidation; and
• has no agreement with creditors, such as a Company Voluntary Arrangement.

If any of these fail, you’ll need to liquidate instead. The 3-month rule catches people out: if you’re still invoicing in March, the earliest you can apply is usually July.

The 7-step closing checklist

Work through these in order when closing down a limited company. Steps 1 to 5 must be finished before you send the application.

1. Stop trading and settle with staff. Pay final wages and follow redundancy rules where they apply.
2. Close payroll. Send your final payroll submission and tell HMRC the company has stopped employing people.
3. Cancel VAT registration if the company is registered, and file the final VAT return.
4. Prepare final accounts and a Company Tax Return for HMRC, and pay all Corporation Tax due. If the final year made a loss, terminal loss relief may let you set it against earlier profits.
5. Settle the director’s loan account and share out what’s left. Collect money owed to the company, pay its debts, then distribute the remaining cash and assets to shareholders.
6. Close the business bank account once everything has cleared. After dissolution you lose access to it.
7. File form DS01 online or on paper, then send a copy to every interested party within 7 days.

The “interested parties” are shareholders, creditors, employees, managers or trustees of any staff pension fund, and any director who didn’t sign the form. GOV.UK warns that ignoring this can lead to a fine and even prosecution. Final accounts go to HMRC with the tax return; you don’t have to file them with Companies House as well.

How much does it cost to dissolve a company in the UK, and how long does it take?

So how long does it take to dissolve a company? Once you’ve cleared the 3-month trading gap, the Companies House stage usually takes around 3 months. The bigger cost is normally your accountant’s fee for the final accounts and tax return. If you need help with that part, see our guide to the limited company tax return or speak to an accountant for your limited company.

What happens to anything left behind

Anything still owned by the company when it’s dissolved, including cash in the bank and even a tax refund paid later, passes to the Crown. Getting it back means restoring the company. After a voluntary strike-off that usually needs a court order, because the cheaper £341 administrative route is for companies that were still trading when they were dissolved. Keep the company’s records, such as bank statements and invoices, for 7 years after it’s struck off. These two rules are why closing down a limited company should never be rushed.

Closing Down a Company: Tax on the Money You Take Out

Once the debts are paid, whatever is left belongs to the shareholders. How that final payout is taxed is often the biggest money decision in closing down a limited company, and it turns on two things: how much is left, and which route you use.

The £25,000 rule on a strike-off

Normally, money a company pays its shareholders is a dividend, taxed as income. But under section 1030A of the Corporation Tax Act 2010, explained in HMRC’s Company Taxation Manual (CTM36220), a distribution made in anticipation of a strike-off can be treated as capital instead, if:

• the total distributed is no more than £25,000;
• the company has collected, or intends to collect, what it’s owed and has paid, or intends to pay, its own debts; and
• the company is actually dissolved within 2 years of the distribution.

Capital treatment means Capital Gains Tax, with a £3,000 annual exempt amount. The limit is a cliff edge, not a band: if the total goes over £25,000, the rule doesn’t apply and the whole amount is normally taxed as a dividend. For 2026/27, dividend tax is 10.75% at the basic rate, 35.75% at the higher rate and 39.35% at the additional rate, after a £500 allowance.

MVL and Business Asset Disposal Relief at 18%

Above £25,000, liquidating a limited company through a members’ voluntary liquidation is usually the way to keep capital treatment. The liquidator’s distributions are taxed as capital gains whatever the amount. If you qualify for Business Asset Disposal Relief, the rate is 18% for disposals from 6 April 2026 (it was 14% in 2025/26). Without the relief, a higher-rate taxpayer pays 24% on gains from shares.

To qualify, for at least 2 years before the disposal you must have been an employee or officer of a trading company and held at least 5% of its shares and voting rights. Most owner-managed companies meet this, but check the company wasn’t mainly holding investments.

Watch the anti-phoenix rule

HMRC’s targeted anti-avoidance rule (CTM36305) can turn a winding-up distribution back into income. It applies when all four conditions are met: you held at least 5% of the company, it was a close company, you carry on or are involved in the same or a similar trade within 2 years, and avoiding Income Tax was a main purpose of the winding up. Closing one contracting company and opening an identical one the next month is the classic trap when closing down a limited company.

Worked example: £20,000 vs £80,000 left in the company

For Sam, a strike-off is the obvious choice. For Jo, an MVL could save around £14,500 in tax before fees, which usually covers the insolvency practitioner’s charge several times over. Any limited company liquidation decision needs proper modelling, which is where an accountant earns their fee.

Closing a Limited Company With Debts to HMRC

If the company owes Corporation Tax, VAT or PAYE that it can’t pay, closing down a limited company becomes a different exercise. Creditors’ interests now come before the shareholders’, and HMRC is often the largest creditor.

• HMRC can object to a strike-off. Anyone owed money can object during the 2-month Gazette period, and HMRC regularly does. An objection stops the dissolution.
• Dissolving to dodge debts can backfire. The Insolvency Service can investigate directors of dissolved companies, and misconduct can lead to disqualification. Where directors have acted improperly, HMRC can in some cases pursue them personally.
• An overdrawn director’s loan account becomes a debt you owe. In a liquidation, the liquidator can ask you to repay it for the creditors.
• Personal guarantees survive. If you signed one for a loan or lease, closing the company doesn’t end it.

The proper route for an insolvent company is usually a creditors’ voluntary liquidation. The shareholders pass a resolution, an insolvency practitioner is appointed, and the business’s assets are sold to pay creditors in the legal order. If the business could survive with more time, ask HMRC about a payment plan first: GOV.UK says HMRC will check whether a plan is affordable for you before agreeing one.

Closing Down a Limited Company: FAQs

How do I close my limited company?

If it’s solvent and has stopped trading for 3 months, finish the final accounts, tax, payroll and VAT, share out what’s left, then apply to strike it off with form DS01. If it has large reserves, consider an MVL; if it can’t pay its debts, speak to an insolvency practitioner.

How much does it cost to dissolve a company in the UK?

The Companies House fee is £13 online or £18 on paper. Most of the real cost is the accountant’s fee for final accounts and tax returns. A liquidation adds an insolvency practitioner’s fee.

How long does closing a company take?

After at least 3 months without trading, a strike-off usually takes around 3 months, including the 2-month Gazette notice period. A liquidation normally takes longer.

Can I close a company with debts?

Not by simply striking it off and ignoring them. Creditors, including HMRC, can object, and the usual route for an insolvent company is a creditors’ voluntary liquidation.

Do I need an accountant to close a company?

It isn’t a legal requirement, but when closing down a limited company the final accounts, Company Tax Return and the choice between strike-off and MVL are where most mistakes, and most tax savings, happen.

What happens to money left in the company bank account?

It passes to the Crown when the company is dissolved, along with any other assets. Distribute everything to shareholders and close the account before you apply.

Can a dissolved company be restored?

Yes, within 6 years. Companies House’s administrative route (£341) is for companies that were trading when dissolved; otherwise you’ll usually need a court order.

Do I still file a final Company Tax Return?

Yes. Closing down a limited company still means sending HMRC final accounts and a Company Tax Return, and all Corporation Tax must be paid before the company is struck off.